RUMOR: Microsoft Interested in Buying AMD

It appears that the computing industry, as well as the gaming industry, may be headed for a tectonic shift of balance- a new rumor states that Microsoft is looking into purchasing CPU and GPU maker AMD a bid to revive its chip design operations. Apparently, Microsoft initiated the talks a few months ago, though it is unclear exactly what has come about from these.

Buying AMD would have multiple strategic advantages for Microsoft- on a larger, macro company wide basis, Microsoft would be able to custom tailor and design chips for its hardware, potentially integrating the software and hardware on its Lumia and Surface product lines far better; this may also provide Microsoft with a foot in the door as far as the future of the computing industry is concerned.

Moreover, Microsoft would also benefit greatly on the gaming front- analysts estimate that Microsoft pays roughly $100 for every Xbox One sold to AMD in royalties (the Xbox One utilizes an AMD SoC). Given the lifetime sales of Xbox One at around 12.6 million units, this means that Microsoft has already paid AMD around $1.26 billion for Xbox One chips. The acquisition of AMD could save it around a billion per year on Xbox One chips alone, which would come as a welcome break to the beleaguered gaming division that has traditionally struggled to stay in the black.

Presuming Microsoft wants to continue licensing out AMD chips, and not keep them completely in house (something that is a common practice in the industry, and also something that Microsoft is wont to do, given how it handled its acquisition of Minecraft last year), it would earn money from each PS4 or Wii U system that is sold in licensing, since both those systems utilize AMD SoCs as well; moreover, Microsoft would also have a direct stake in PC gaming, given AMD’s prominent position in the PC CPU and GPU market.

It sounds like it would be a very smart move on Microsoft’s part to acquire AMD, then, but there are other things that must be considered- for instance, the action may be viewed as anti competitive by Anti Trust commissions, and Microsoft already has enough trouble on that front. Moreover, Microsoft shares a very close relationship with chip maker Intel, and an acquisition of chief rival AMD is undoubtedly going to alienate them.

But still, it seems as though the pros might outweigh the cons. Whether or not the talks go through, the next few months promise to be very interesting.